Jardine minority shareholders oppose US$1 bil 'discount' in buyout plan

Opposition from minority shareholders to a restructuring effort by the Jardine Group is growing, with some investors considering going to court over its plan to buy out a London and Singapore-listed unit for what they say is a US$1 billion ($1.34 billion) discount.

See: Jardine Matheson Holdings to acquire remaining stake in Jardine Strategic for US$5.5 bil; Jardine Strategic shareholders to receive US$33 per share

Some shareholders are considering asking courts in Bermuda, where Jardine Strategic Holdings Ltd. is incorporated, to assess its fair value, said an advisor to the investors, in a bid to make Jardine Matheson Holdings Ltd. raise its acquisition price.

Jardine Matheson on Monday said it planned to acquire the 15% of Jardine Strategic it doesn’t own for US$5.5 billion in cash, representing US$33 per share.

While the amount is at a 20% premium to Friday’s closing price of Jardine Strategic, it’s a discount of at least 20% to the value of the company’s listed assets, according to Justin Tang, head of Asian research for United First Partners, which advises investors who hold some 2 million of the firm’s shares.

The mounting opposition poses a challenge to a plan aimed at helping shore up Jardine Group’s finances after the 188-year-old conglomerate’s retail and tourism businesses were hammered by the Covid-19 pandemic. It’s one of two surviving British trading firms in Hong Kong; the other, Swire Group, also faces setbacks including the toll the virus has taken on carrier Cathay Pacific Airways Ltd.

United First Partners has written to the Singapore and London exchanges -- where Jardine Strategic is listed -- seeking clarification on the deal’s corporate governance implications, according to Tang.

Still, the minority investors do not have a strong bargaining position. The two companies’ incorporation and listing arrangement allows Jardine Matheson to vote in the acquisition, and its shareholdings of 85% are more than the 75% approval required for the buyout to pass.

This means minority shareholders won’t have a say in the deal, Tang said. “As a blue-chip company, you should not have made your shareholders go through this,” he added. “It misses the spirit of corporate governance.”

Jardine Group, whose businesses include the Mandarin Oriental International Ltd. hotels, didn’t immediately respond to a request for comment on Thursday.

Family Control

Jardine Matheson’s shares have risen 5.2% in Singapore since the deal was announced on Monday, while Jardine Strategic’s stock has barely moved in the days since.

Jardine Matheson could basically name any price and the minority shareholders of Jardine Strategic won’t have a choice, Hong Kong-based activist investor David Webb, who doesn’t have shares in any Jardine companies, said in an email on Thursday.

Founded by Scots William Jardine and James Matheson, the group is today controlled by the Keswick family, led by executive chairman Ben Keswick. The cross-holding structure, in which Jardine Strategic also holds 59% of Jardine Matheson, allows the family dominating influence over the group despite a relatively small stake.

After the restructure, the “principal shareholder group” comprising the collective shareholdings of Jardine’s founding and leading families will hold about 43% in Jardine Matheson, the company said in its Monday statement.

Shareholders of other Jardine subsidiaries including Mandarin Oriental, retail arm Dairy Farm International Holdings Ltd. and real estate branch Hongkong Land Holdings Ltd. can also eventually expect a similar compulsory purchase, Webb tweeted earlier this week.

‘Good Deal’

On completion of the deal, Jardine Matheson will become the single holding company for its subsidiaries, a move the group’s Monday statement said will result in a “conventional ownership structure and a further increase in the group’s operational efficiency and financial flexibility.” The deal is expected to come into effect by the end of April.

The origins of the current structure, in the form of cross-holdings in dual holding companies and majority interests in listed subsidiaries, lie in a series of restructuring in the 1980s, the company said in the statement.

The cross-holding structure has long been criticized by investors for being opaque and the restructuring would make Jardine Matheson “much cleaner and much more investable,” said Nicolas Van Broekhoven, a Singapore-based analyst at researcher Smartkarma. The group will be able to pay better dividend and will probably trade at a smaller discount to its value, he said.

“For Matheson shareholders it’s a really good deal,” Van Broekhoven said. “For other Strategic shareholders this is not a good deal. The price should be raised substantially.”